Closing trading windows: To trade or not to trade

By Jabarati Chandra and Pratichi Mishra, S&R Associates

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (Insider Trading Regulations) require listed companies to use a trading window for monitoring trades by designated persons and their immediate relatives. The compliance officer is responsible for closing the trading window under certain circumstances when designated persons are reasonably expected to be in possession of unpublished price sensitive information. With certain exceptions, designated persons and their immediate relatives are not permitted to trade when the trading window is closed. When open, designated persons are required to apply to the compliance officer for pre-clearance of trades. Trading has been defined broadly to include subscribing, buying, selling or dealing in securities, or agreeing to do so.

Jabarati Chandra
S&R Associates

Following the recommendation of a committee on fair market conduct, SEBI issued amendments to the Insider Trading Regulations which became effective on 1 April 2019. The amendments expressly included promoters and promoter group as designated persons. They also introduced a provision into the code of conduct stating that the trading restriction period “can” apply from the end of every quarter until 48 hours after the declaration of financial results. Prior to these amendments, the practices of listed companies varied: some closed the trading window a week or so prior to the end of the quarter, some closed it from the beginning of a quarter and others closed it 15 days prior to the announcement of the results.

Many companies interpreted the new provision as advisory and not mandatory (that is can as opposed to shall) and did not close the trading window from 1 April 2019. They took the view that they would announce the last quarter’s financial results at the end of April or during May and under the previous practice, this would allow them to close their trading windows 15 days prior to such announcements.

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Jabarati Chandra is a partner and Pratichi Mishra is an associate at S&R Associates, a law firm with offices in New Delhi and Mumbai.


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